‘Vaping Tax’ Vote Clouded by Circular Reasoning

On the same day the nation elects the next president of the United States, Californians will vote on a ballot proposal that would impose a $1.6 billion tax increase on e-cigarettes and other vaping products, and all the circular reasoning that goes with it.

Proposition 56 would increase the state’s tax on cigarettes by $2 per pack while eroding the distinction between cigarettes and other tobacco products, such as cigars and even chewing tobacco, which does not produce smoke.

The proposition’s tax also would apply to non-tobacco products containing nicotine.

Proponents support such a tax under the guise of encouraging people to quit smoking and helping the state pay for anti-smoking programs. Another pretense offered is helping health insurers pay for smokers’ health care, even though insurers already charge smokers extra under the Affordable Care Act (ACA).

As with a circle, one can start just about anywhere in the proposition’s text and stumble into its circular reasoning and other fallacies. For instance, Section 1.k says the revenue generated by the proposition would help fund “implementation and administrative programs to support law enforcement efforts to reduce illegal sales of tobacco products to minors, cigarette smuggling, and tobacco tax evasion.”

Hiking taxes $2 per pack to fund enforcement against California’s tobacco black market will most likely inspire the black market to greater activity, if Oklahoma’s experience is any indication. In May, proponents of expanding Medicaid under ACA in Oklahoma tried to gain approval for the program by funding it with a $1.50-per-pack cigarette tax increase.

“A study [the Oklahoma Council of Public Affairs] did with the Mackinac Center found that this massive of a tax increase would increase cigarette smuggling [so as to account for] 2 to 19 percent [of the market],” Jonathan Small, president of OCPA, told Health Care News just before the measure failed in May.

Creating a tax to fund a crackdown on a black market created by the same tax is circular. So is creating a tax to fund the state’s attempt to collect the same tax, another mind game proponents play in this section of the proposition.

Although it is certainly possible the number of residency programs is limited in California, it is hard to see how passing new taxes to fund implementation and administrative programs will square that circle.

At the macro level, the proposition’s dual purposes are at odds with each other. One objective stated in the text is to encourage smokers to quit smoking. Another objective is to increase revenue for existing programs, some of which have nothing to do with helping smokers quit.

These objectives directly contradict each other. Even if Proposition 56 succeeds in encouraging smokers to quit, this will result in fewer cigarette purchases and, consequently, less revenue to fund state programs.

In fact, Proposition 56 could actually encourage smokers to keep smoking tobacco. By forcing a smoker to pay the tobacco tax whether he or she smokes cigarettes or vapes, Proposition 56 fails to create a tax advantage for quitting smoking – expressly undermining one of its objectives.

Not only logic, but data, suggest taxing vaping products as though they were tobacco could lead smokers to smoke more cigarettes and for longer. An August 2016 policy brief by R Street, a free-market think tank, quotes Public Health England’s analysis of vaping and its proven market of former smokers – smokers who gave up cigarettes expressly for e-cigarette substitutes.

“The comprehensive review of the evidence finds that almost all of the 2.6 million adults using e-cigarettes in Great Britain are current or ex-smokers, most of whom are using the devices to help them quit smoking or to prevent them going back to cigarettes,” Public Health England reported. “It also provides reassurance that very few adults and young people who have never smoked are becoming regular e-cigarette users (less than 1 percent in each group).”

In other words, vaping products help many smokers quit smoking tobacco. Taxing these potentially life-saving products is unhealthy policy.

North Carolina’s Obamacare exchange market is in crisis mode. UnitedHealth Group and Aetna have backed out. That leaves 80% of North Carolinians who don’t have job-based health insurance with potentially one carrier option in 2017 – Blue Cross and Blue Shield of North Carolina (BCBS NC). However, the company has until September 24th to decide whether it will continue offering non-group health plans in all of North Carolina’s 100 counties. If BCBS NC decides to narrow its scope, then Obamacare’s exchanges will be non-existent for some. What we do know at this point is that Cigna will be available to enrollees in five counties. It originally had plans to participate in six counties within the Research Triangle Region, but I’ve been informed that it dropped Durham. …

High-risk enrollees aren’t to be blamed for insurance companies’ financial hemorrhaging. Rather, the way in which the exchanges are designed has caused detrimental disruption to the non-group market as a whole. Insurance regulations like community rating and a weak individual mandate provide an incentive for sick people to sign up and healthy people to opt out of health coverage. The exchanges’ loose enrollment policies have also generated all sorts of unpredictable projections on the actuarial front.

For example, policyholders can pay only 9-months worth of a 12-month product. Let me repeat that. Policyholders are allowed to pay their premiums for 9 months and still have an insurance plan for the full year. This is because Obamacare grants people a three-month grace period before their plan defaults. Therefore, it’s technically legal to use health care services and not pay monthly premiums for three consecutive months until the plan is up for renewal. For the first 30 days within this grace period, the insurance carrier is on the hook. Medical providers are then responsible for any outstanding tabs for the remaining 60 days.

The individual mandate also doesn’t apply to Obamacare’s three-month grace period for not having health insurance. Naturally, people have leveraged this policy to their advantage by purchasing coverage, navigating the medical system as needed, and then dropping coverage for three months at a time. While annual enrollment periods are supposed to prevent this type of behavior, the law’s laundry list of special enrollment qualifiers allows policyholders to game the system. Just Google it.

How should Congress go about Obamacare damage control? Republican alternatives like those put forth by Paul Ryan and the House GOP propose that fixing our health insurance system entails repealing the law’s taxing and spending. It eliminates the individual and employer mandates and instead uses incentives to lure people to sign up for coverage who do not have job-based health insurance. For example, if someone refuses to purchase health insurance during a national open enrollment period, he or she could be faced with higher premium charges for future enrollment.

Although America’s uninsured rate has fallen to a historic low, cost and quality of health care seems to fluctuate from state to state.

According to US Centers for Medicare and Medicaid Services data, Americans shell out an average of $9523 for health expenditures annually--and this figure is expected to continue to rise. Compared with their counterparts in other wealthy nations, Americans pay the highest price for common prescription drugs and medical procedures.

With that in mind, WalletHub analysts recently compared all 50 states and the District of Columbia across 3 key dimensions: health care costs, access, and outcomes. Within those dimensions were 29 key metrics--including average monthly insurance premium, number of physicians per capita, and percentage of adults and children with health insurance coverage-- to determine which states offer the most cost-effective and highest-quality care.

Healthcare Bluebook, a developer of an online price-checking tool for healthcare visits, procedures, tests and medications, and healthcare marketplace MDsave.com are collaborating to allow consumers to price healthcare services at pre-negotiated rates. The collaboration is being driven by the increasing number of consumers carrying high-deductible health plans, according to both companies.

As part of the agreement the two companies will cross-promote each other’s services on their respective websites. Visitors to HealthcareBluebook.com can access MDsave.com, where they can purchase healthcare vouchers for procedures from local providers at pre-negotiated and discounted rates. Visitors to MDsave.com can access Healthcare Bluebook’s price schedules for local healthcare services.

MDsave.com will pay an undisclosed fee to Healthcare Bluebook for customers referrals. In addition, both companies expect the marketing alliance to expand their customer base.

“When it comes to healthcare services there can be up to a 10 times difference in pricing for the same procedure in the same area,” says Healthcare Bluebook CEO Jeff Rice. “An MRI at one provider can cost $5,000 and $500 at another in the same area. Our focus is to provide pricing so self-insured employers and consumers can see the cost of services between health systems.” Magnetic resonance imaging, or MRI, is a test that uses a magnetic field and pulses of radio wave energy to make pictures of organs and other structures inside the body.

Healthcare Bluebook gathers pricing data from multiple sources, including healthcare providers, employers and insurance companies. The quoted price for a service on its website reflects the out-of-pocket amount a patient would pay after an insurer has paid its portion of the claim.

Employers using Healthcare Bluebook pay less than $2 per month per employee, on average, says Rice. Healthcare Bluebook has about 6,000 employers as customers. The company declines to disclose the names of clients.

MDsave.com has pre-negotiated pricing on more than 750 procedures from more than 100 hospitals and healthcare providers. MDsave.com does not accept private insurance, Medicare or Medicaid to cover any portion of the procedures offered through its site.

Patients using MDsave.com see all the costs associated with the quoted price. In some cases, however, additional fees such as unanticipated laboratory fees or charges arising from post-surgical complications can occur and become the patient’s responsibility.

Patients pre-pay in full for the discounted procedure upfront through MDsave.com. “We can negotiate discounts of up to 60% over contracted rates with insurers,” says MDSave.com CEO Paul Ketchel. “We are a service for patients with high-deductible plans electing to pay out-of-pocket for procedures.”

MDsave.com charges hospitals on a sliding scale of $4,000 to $5,000 per bed per every 100 beds per month.

Federal regulators on Monday granted tentative approval to the first drug for muscular dystrophy, following an intense public campaign from patients and doctors who pushed for the largely unproven medication.

The approval came despite an internal dispute among Food and Drug Administration officials that ultimately had to be resolved by the agency’s chief. Some staffers said there was little evidence the drug worked. Adding to the high-stakes decision, officials faced direct pleas from patients’ families, politicians and physicians.

The FDA cleared Sarepta Therapeutics’ Exondys 51 for a rare form of Duchenne muscular dystrophy, a deadly inherited disease that affects boys. Company officials said the drug would cost about $300,000 per year. Like other makers of high-cost specialty drugs, Sarepta said it would offer financial assistance to help families get the drug.

It’s the first FDA approval for the degenerative condition, which causes muscle weakness, loss of movement and eventually death.

The approval was based on a company study of just 12 boys. The agency is requiring Sarepta to conduct a larger study examining whether Exondys 51 results in improved movement and function for patients. If the study fails to shows it helps, the FDA said it could withdraw the drug.

Duchenne’s muscular dystrophy is a rare disease, affecting about 1 of every 3,600 boys worldwide and usually causing death by age 25, according to the National Institutes of Health.

The new drug targets a genetic mutation that affects about 13 percent of Duchenne’s patients. Previously there were no U.S.-approved drugs to fight the disease, though steroid drugs have been used to slow the loss of muscle strength.

Pat Furlong, a patient advocate who lost two sons to the disease, called the announcement “an extraordinary win.”

“I think this is a collaborative effort that shows the FDA, companies and the patient community can work together toward a single goal, and that is improving the lives of patients,” said Furlong, founder and president of Parent Project Muscular Dystrophy, a nonprofit that helped fund travel and other expenses related to the study.

The FDA cleared Sarepta’s drug under its accelerated approval program, reserved for drugs that show promising early results that have not been confirmed. The drug acts on a protein called dystrophin, which plays a role in the growth of muscle fibers. The 12-patient study showed an increase in dystrophin “that is reasonably likely to predict” benefit in some patients, the FDA said in its announcement

“Accelerated approval makes this drug available to patients based on initial data, but we eagerly await learning more about the efficacy of this drug through a confirmatory clinical trial,” said Dr. Janet Woodcock, director of the FDA’s drug center.